Private Equity News & Analysis

Side Letter: CalPERS confidence, Baring latest, Liquid Stock

Good news everyone: CalPERS still loves PE. Here’s today's brief, for our valued subscribers only.

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Just happened

A vote of CalPERS confidence

“We need private equity, we need more of it, and we need it now,”California Public Employees’ Retirement System chief investment officer Ben Meng (pictured) said during the pension giant’s investment committee meeting yesterday.

That’s music to the ears of PE folk. CalPERS private equity portfolio is not only massive (and needs to get even bigger) but it is also the subject of much very public debate, so positive noises have an industry-wide ripple effect.

Under former CIO Ted Eliopoulos, a number of private equity initiatives were either in train or proposed and it looks like Meng will continue in this vein. Both CalPERS staff and investment consultant Wilshire Associates made a case for increased opportunistic, direct and co-investments, given today’s highly competitive investment environment replete with dry powder and high valuations.

CalPERS expects its PE programme to deliver returns of at least 8.6 percent, which helps when your actuarial requirement for the whole fund is 7 percent. The pension system’s private equity portfolio returned 12.5 percent, 12.3 percent and 11.4 percent over one, three and 10 years, respectively, as of 30 September.

‘Life’s too short to invest in Russia’

Overnight developments in the case of Baring Vostok’s Mike Calvey:

  • The firm has installed temporary leadership while Calvey remains in jail
  • Its spokespeople are not commenting on “key person” clause implications, noting that it is in constant dialogue with investors.
  • The Financial Times is reporting that Russia’s central bank will attempt to mediate between the warring parties (paywall)
  • The RUIE, a weighty trade body, convened to call on the Russian authorities to assess the legality of the criminal case against Calvey

Russia has been a hard sell for general partners for a while now (although local manager UFG private equity put the case to us last year). Fundraising figures show a steady decline from a high in 2013, when 10 funds raised $6.7 billion, to a low last year of zero. 2019 will surely register the same. As one PE veteran told us this week: “Life’s too short to invest in Russia.”

Essentials

Coming to Korea. Scoop: Korean mid-market firm IMM Private Equity is targeting $1.5 billion for its next buyout fund, set to launch next month. Expect more US investors to be involved this time around compared to the firm’s $1.2 billion predecessor, as North Americans go in search of what the country’s developing PE market has to offer. Other Koreans on the fundraising trail are VIG Partners, seeking up to $800 million for Fund IV, and Hahn & Company, eyeing close to $2 billion for Fund III.

Goldman Sachs and Coller Capital are certainly no strangers to partnering up: look at the Nordic Capital restructuring, for example. At the smaller end of the spectrum is Liquid Stock. The two firms have joined with Morgan Stanley AIP to back this unusual $150 million fund. This explainer is getting a lot of interest on Secondaries Investor. In short, the fund helps employees and shareholders of private companies monetise their equity without having to sell their stakes. It does this by extending part-equity, part-debt financing to the shareholders collateralised against their holdings.

Inside tip

Which stalwart of the Dutch mid-market is back on the fundraising trail? We’ll let you know shortly.

Have news or views you’d like to share with us, on this or else? We’d love to hear from you.

Deep data

Want more data? There are more than 6,700 institutions in our database, including Baring Vostok, Goldman Sachs, Coller Capital, Morgan Stanleyand CalPERS from today’s Side Letter.

He said it

“It’s just important to understand that everyone and everything is about politics now.”

A European limited partner tells PEI that in Russia one can no longer separate business from politics.

 

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